Après moi, le déluge
Water, water everywhere
Huge increases in freight rates last year are likely to lead to container carriers reporting record fourth-quarter earnings, despite carrying fewer volumes than in Q4 20.
This morning, Cosco-owned OOCL released its fourth-quarter operational update that reported volumes across its four main trades declined by 16.9% to 1.85m teu, compared with Q4 20’s 2.23m.
The financial performance, however, was markedly different, with total revenues more than doubling, from $2.4bn in the fourth quarter of 2020 to over $4.8bn.
“This record result was achieved despite severe congestion around the network, which drove down liftings by 16.9% and loadable capacity by 14.3%,” OOCL said.
“The overall load factor was 2.7% lower than the same period in 2020,” it added, but “overall average revenue per teu increased by 142.3%”.
The results chime with new research by Drewry, which suggests “container demand growth is losing some momentum amid mounting headwinds, but carriers will continue to rake-in huge profits”.
The main reason is the continuing limits on trade capacity, caused by supply chain congestion and scarce equipment.
“We think Q3 21 probably represents the peak quarterly earnings for carriers, but that quarterly results in 2022 will stay on a more even keel that will average out slightly higher”, wrote Drewry Container Forecaster editor Simon Heaney in a commentary. “Our revised estimate for this year now stands at $200bn (margin 37%).
“The smoother earnings forecast rationale stems from a pivot away from the volatile (and likely retreating) spot market towards longer-term contracts that are expected to be signed at much higher levels in upcoming negotiations.
“The pandemic and ensuing supply chain crisis is the primary driver of the supercharged carrier profits and share price bonanza. In simple terms, the longer the congestion lasts, the longer that freight rates and carrier profits will stay extremely high,” he added.
OOCL’s final result for full-year 2021 saw it carry volumes of 7.59m teu, growth of 1.7% on the 7.46m teu it carried in 2020. However, revenue grew 110%, to $15.68bn in 2021, compared with $7.64bn in 2020.
As a result, Drewry has reduced its expected growth in global volumes in 2021 from 8.2% to 6.5%, and has forecast growth this year of 4.6%.